Sierra Leone News: OTI eyes endorsement of Corporate Governance Code

The Open Tax Initiative (OTI) has welcomed the draft National Corporate Governance Code by the Corporate Affairs Commission (CAC) and eagerly awaits the validation and adoption by cabinet and are hopeful that Parliament will endorse it.
In an OTI press release, the Executive Director, Tanu Jalloh, said that there is need to show the ‘chain’ of ownership of all organizations and natural persons. “In instances where an organisation holds corporate membership, the natural persons who benefit from the corporate entity have to be disclosed either at point of establishment/incorporation or at any time such a relationship exists.”
The draft policy recognises the risk of corrupt practices, illicit financial flows and tax evasion, is quite high in other sectors where disclosure on beneficial ownership is not made. This Code seeks to set out certain basic disclosures and reporting requirements for all companies operating in Sierra Leone.
The Registrar of the CAC, Michala Mackay, recently said that the Code will improve governance for private companies. “But, there is a need for us as government entities to improve the way we do business to improve corporate governance, so the Code cuts across. It is going to be the first code in West Africa that deals with both the public and private sector so far as corporate governance is concerned.”
She went on to say that when adopted it will feed into the Country Performance Institutional Assessment (CPIA), which will be used to give the country very high rating, not only by attracting investors but also attract the necessary support that Sierra Leone needs in the global context.
OTI Jalloh emphasised that though the Code is applicable on a ‘comply or explain’ basis existing or new legislation, may require a higher standard of disclosure and compliance for companies operating in the extractive industry.
The country’s Extractives Industries Transparency Initiative (EITI) realises the huge problem of determining ‘who is a beneficial owner’ and comes up with a standard against which such persons can be appropriately identified.
In its draft Beneficial Ownership Roadmap 2016-2020 the watchdog notes that: “When the beneficial ownership of companies involved in the extractive industry is… difficult to determine for both governments and citizens, it creates a space that can be exploited by corrupt actors or those seeking to avoid tax obligations.”
This move, Jalloh says, will increase knowledge of how corporations should account for their actions and provide an opportunity for the public to identify the actual owners of businesses, especially in the extractive sectors.
“These are very crucial elements in the global call for business ownerships to be transparent about their statuses or interests and take responsibility for their actions by being accountable to the public whose lives often depend on their business decisions.”
He said that with these developments, standards are going to be set to which they can be held to. “We envisage a huge boost in the advocacy efforts of civil society and the media who campaign against tax evasion and illicit financial flows,” he said.
Jalloh added that although we lack country level case studies on the drivers and causes of the illicit financial flows, the United Nations Development Programme reports that illicit capital outflows from all developing countries, like Sierra Leone, are estimated annually at $1 trillion USD.
This amount is ten times the official development assistance from Organisation for Economic Co-operation and Development’s Development Assistance Committee. The UN estimates of funds held offshore put the figures at 11.5 trillion USD and the annual loss of tax revenue is as huge as $250 billion USD.
“This is taking a huge toll on a country like Sierra Leone whose domestic revenue mobilization drive is constrained by weak human resource base and the lack of innovation in terms of technology and research driven approach to tax administration” he said.
ZJ/28/11/17
By Zainab Joaque
Wednesday November 29, 2017.